Ministry of Corporate Affairs vide notification No. G.S.R. 880(E) dated 1st December, 2025- Companies (Specification of definition details) Amendment Rules, 2025 substituted further the definition of small company as prescribed under Section 2(85) of the Companies Act, 2013.
The new definition of a small company effective from 1st of December, 2025, raises the paid-up capital to Rupees 10 crore and the turnover to Rupees 100 crore bringing more companies into the "small company" category, providing them with reduced compliance burdens. It also simplifies business operations and supports the growth of start-up’s and expands businesses by allowing them to retain benefits for a longer period.
Amended Definition of small company vide Notification No. G.S.R. 880(E) dated 1st December, 2025-Companies (Specification of Definitions Details) Amendment Rules, 2025 is as under:-
“small company” means a company, other than a public company-
- Paid-up share capital of which shall not exceed ten crores rupees; and
- Turnover of which as per profit and loss account for the immediately preceeding financial year shall not exceed one hundred crores rupees.
(Note:- Companies (Specification of Definitions Details) Amendment Rules, 2025 substituted clause (t) in Rule 2(1)- “(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees ten crores and rupees one hundred crores respectively.")
Advantages of new definition:-
- Many more companies will now qualify as "small companies" due to the significantly higher financial thresholds.
- Companies that move into the small company category will be subject to simplified rules, which reduce their compliance obligations under the Companies Act.
Relaxations available to Small Companies:-
- Annual Return- Annual Return is filed in Form No. MGT-7A (abridged format) instead of Form MGT-7. (Section 92 & Rule 11 of Companies (Management and Administration) Rules, 2014)
- Cash flow statement- The financial statement may not include the cash flow statement. (Section 2(40) of Companies Act, 2013)
- Board of Directors Report- Abridged format of Board of Directors Report prescribed. (Section 134 (3A) of Companies Act, 2013)
- Fees- Lesser incorporation and filing fees. (Rule 12 of Companies (Registration Offices and Fees) Rules, 2014)
- Merger or Amalgamation- Two or more small companies may enter into a scheme of merger or amalgamation without complying with Sections 230 and 232. (Section 233 of Companies Act, 2013)
- Board of Directors meeting- At least one meeting of the Board in each half of calendar year with minimum 90 days gap between two meetings. (Section 173 (5) of Companies Act, 2013)
- Applicability of Companies (Auditor’s Report) Order, 2020- Small companies are exempted from complying with CARO, 2020 for the purpose of statutory audits. (Companies (Auditor’s Report) Order, 2020)
- Dematerialisation of securities- Small companies are exempted from the requirement of mandatory dematerialisation of securities. (Rule 9B of Companies (Prospectus and Allotment of Securities) Rules, 2014)
- Penalties- Non-compliance with any provisions of Companies Act, 2013 attract one-half of prescribed penalty subject to maximum of Rs. 2 lacs for company and Rs. 1 lac for Officer in Default. (Section 446B of Companies Act, 2013)
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